Tangential Musings about Enterprise IT…

Monthly Archives: March 2015

It took Apple exactly 3 years to break the 50m iPhone barrier (it sold 74m last quarter alone), and the iPhone was a significant device: it provided a user experience that changed how phones were made, and destroyed the sales of the corporate-friendly Blackberry.

Three years later, the iPad did this in just 7 quarters, despite being a device that no one needed. That’s marked by the fact that iPad sales are down year on year in 2015, and are unlikely to recover: Apple has released the iPhone 6+, which is big enough for many people, and the new MacBook, which will wipe out both the MacBook Air, some of the MacBook Pro, and some of the iPad audience.

We will see the iPad go the way of the iPod Classic – loved by many for years to come, and then finally, with dwindling sales, being discontinued.

But all these launches were overshadowed by the hype of the Apple Watch. CEO Tim Cook has big boots to fill: the launch of the iPad was still looked over by the late Steve Jobs, and Tim has been doing an incredible job of fine-tuning the Apple products ever since. He’s a supply chain guy, and what he has done to the quality and production of Apple’s products is nothing short of incredible.

Back to the Apple Watch. Cook clearly understood a few things about the Swiss Watch market when they built the Apple Watch.

First, he understood that luxury watches are Veblen Goods – that is to say, the demand is proportional to the price. The Porsche 918 Spyder, starts at an incredible $845,000, but you can pay $49,900 for a Porsche Macan and get the same steering wheel. With the Apple Watch, the $17,000 Apple Watch Edition brings greater value to the $349 Apple Watch Sport – whilst there are enough rich A-list celebrities who will buy (or be given) the $17,000 insanity.

Second, he bet that there are enough Apple Fanboys (and girls) who will buy anything Apple peddle them. What’s more, there are enough poorly-created smart watches on the market that there is a place for Apple to come along and bring their brand: user experience and simplicity.

For me, in the Enterprise Software market, the Apple Watch has the capability to transform the way corporations work. There are many business decisions which need making on a daily basis which could be subtly displayed on a watch, and could be made more quickly. These aren’t complex things, but rather high-priority small decisions like approving an urgent purchase order on the move.

To my eye, the Apple Watch, however, looks rather like the 1st Generation iPad. It’s somehow ungainly and even – shock horror – a little ugly. But do you remember the 1st Generation iPod (those babies sell for $10k+ sealed!), and iPhone?

What’s more, the Apple Watch is missing a bunch of the features that made it interesting – pulse and blood pressure monitoring, for example. It doesn’t have wireless charging, or a self-charging mode like many Swiss Watches. It will need charging every day and that’s a real hassle.

Even worse, there’s no guarantee that your $17,000 shiny new toy will be upgradable beyond software updates, and Apple will be bringing new watches out every year. My current watch has been on my wrist for over 15 years, and it’s one thing buying a new iPhone every 2 years, but another story spending $17,000 on a watch every 2 years. That is truly for the super rich.

My prediction is that it will sell, but not anything like as well as the second generation, which will be lighter, have a good battery life and add the features that people really wanted. Let’s see whether it can get to 50m devices sold in less than 7 quarters (I predict it will before the end of 2015).

I also predict that the sales won’t meet the investors’ lofty expectations and the stock price will fall. Time to short Apple stock, then.